∗

The U.S. Westward Expansion

∗∗
Guillaume Vandenbroucke

International Economic Review

Vol. 49, No.1, February 2008, pp. 81-110.

Abstract

The U.S. economic development in the nineteenth century was characterized

by the westward movement of population and the accumulation of productive
land in the West. This paper presents a model of migration and land improve-
ment to identify the quantitatively important forces driving these phenomena.
The conclusion is that the decrease in transportation costs induced the west-
ward migration, while population growth was responsible for the investment in
productive land.

∗ This is a revised version of the second chapter of my dissertation submitted to the Uni-

versity of Rochester. I am very thankful to Jeremy Greenwood for his support and guidance.
I am also indebted to the editor and two anonymous referees for advice that improved the
paper substantially. Finally, I would like to thank Mark Bils, Stanley Engerman and partici-
pants in seminars at the University of Pennsylvania, the Federal Reserve Bank of Philadelphia,
the University of Western Ontario, the University of Southern California, the University of
Montreal, the University of California Riverside and the 2003 Society for Economic Dynamics.
∗∗ Department of Economics, University of Southern California, 3620 S. Vermont Ave, KAP

324F, Los Angeles, CA, 90089-0253. Email: vandenbr at usc dot edu.

1
1 Introduction
The United States of 1900 differed dramatically from the country created after
the Revolutionary War. The first prominent difference was size. In 1800 the
U.S. was less than one million square miles, while in 1900 it encompassed about
three million square miles. A consequence of this territorial expansion was the
significant growth in the stock of productive land. Between 1800 and 1900 the
stock of land was multiplied by 14, that is an annual growth rate of 2.7 percent –
see Figure 1. The second difference was the change in the geographic distribution
of population. In 1800, less than seven percent lived in the West. By 1900 this
number increased to roughly 60 percent – see Figure 2. The combination of
these two facts constitutes the Westward Expansion. The geographical shift of
economic activity also captures the Westward Expansion. In 1840, the West
accounted for less than 30 percent of total personal income whereas in 1900 this
share rose to 54 percent (and remained stable at about 60 percent ever since).
The Westward Expansion was a part of the growth experience of the United
States. From this perspective, the present paper contributes to the literature
addressing phenomena such as the demographic transition and the structural
transformation.1 It is also interesting to note that the Westward Expansion did
not affect only the United States. During the nineteenth century, 60 million
European migrated to the new world. Most were attracted by the economic
opportunities they expected to find there and, in particular, the possibilities to
acquire land in the western part of the United States. In fact, the Westward
Expansion is a phenomenon similar to the international immigration to the
United States as a whole.
This paper proposes an investigation of the quantitatively important forces
driving the Westward Expansion. The focus is on the time path of the ge-
ographic distribution of population and the accumulation of productive land.
Specifically, the question is: What forces can account for the magnitude and
pace of the westward movement of population and accumulation of land, during
the nineteenth century?
The strategy is the following. Section 2 presents the facts about popula-
tion movement and productive land, and discusses the forces that might have
caused the Westward Expansion. The forces under consideration are population
growth and technological progress in various activities, such as transportation,
production and the development of productive land. Section 3 presents a model
incorporating these forces and, for clarity, proceeds in two steps. First, Sec-
tion 3.1 develops and analyzes a static model in which the mechanisms are as
transparent as possible. However, for the quantitative question at hand, a dy-
namic model is a more appropriate tool for three reasons. First, migration was
a major feature of the Westward Expansion and one can easily differentiate it
from natural increase in a dynamic setting. Second, investment in land was an-
other major aspect which needs to be modeled dynamically. Finally, a dynamic
model allows one to compute transition paths, and thus analyze the pace of the
1 Contributors to this literature are, for instance, Greenwood and Seshadri (2002) and

Caselli and Coleman (2001).

2
Westward Expansion. Section 3.2 presents such a model. Section 4 presents
a computational experiment consisting of two steps. In the first, the proce-
dure used to assign numerical values to the parameters of the dynamic model
is described. Part of this procedure implies that the model is matched to the
data from the onset. The findings of the quantitative analysis of the model are,
therefore, described in the second step, through a set of counterfactual experi-
ments. Each experiment consists in shutting down one driving force at a time,
recomputing the transition path and assessing the departure from the baseline
results. The conclusion of this exercise is that the decrease in transportation
costs induced the westward migration, while population growth was responsible
for the investment in productive land. Section 5 concludes.

2 Facts and Hypothesis

2.1 Population
In 1803, at the time when president Thomas Jefferson purchased the Louisiana
territory, a small U.S. army unit, lead by Meriwether Lewis and William Clark,
headed west across the continent. The goal of the expedition was to find a route
to the Pacific ocean using the Missouri and Columbia river systems. Lewis and
Clark returned more than 2 years later with their findings concerning the land,
its natural resources and its native inhabitants. Their work became most valu-
able for migrants that, throughout the rest of the century, settled the continent.
The demographic aspect of the Westward Expansion is represented by the
increasing share of western population, displayed in Figure 2. It is important
to keep in mind that there are two causes leading to an increase in this share:
migration and, potentially, an excess rate of natural increase of the western
population over the eastern population.
It is difficult to build a consistent measure of internal migration for the
nineteenth century because the Census does not report population by state of
birth and state of residence before 1850. There is little debate, however, about
the existence of such migration. Gallaway and Vedder (1975), for instance,
estimate the components of population growth for the “Old Northwest,” for
the period 1800-1860.2 They show that between 1800 and 1810, 80 percent
of population growth in this region was accounted for by net migration. This
percentage was 77 in the 1810s and 50 in the 1820s. Along the same line, Oberly
(1986) reports that a third of the veterans of the war of 1812 lived as old men
in a more western state than the one where they volunteered to serve.
During the nineteenth century, there was a fertility differential in favor of
western regions – see Yasuba (1962). It is not easy to conclude, from this
evidence, that the rate of natural increase was higher in the West than in the
East, though. There are two reasons. First, one needs to compare mortality
rates. Unfortunately, region-specific mortality rates going back to 1800 are not
2 The Old Northwest corresponds to today’s East North Central states: Ohio, Indiana,

Illinois, Michigan and Wisconsin.

3
available. Second, the rate of natural increase also depends on the male-to-
female ratio, which was higher in the West. This could offset the effect of
higher fertility. Imagine a fertility rate of 1 kid per woman in the East and 2
in the West. Suppose now that there is 1 man per woman in the East and 3 in
the West. Then, everything else equal, the rate of natural increase is the same
in both locations.

2.2 Land
The territorial expansion of the United States during the nineteenth century was
mostly a political and military process. The Louisiana purchase, for instance,
was a spectacular acquisition that doubled the size of the country. From the
perspective of economic analysis, though, only productive land matters and the
process of its acquisition is an investment. At the eve of the nineteenth century,
the vast majority of western land had never been used for productive purposes.
Settlers moving to the West had to clear, break, drain, irrigate and sometime
fence the land before it could be used to produce goods. In doing so they built
an important part of the country’s capital stock. Gallman (2000, Table 1.12)
computed that, in the 1830s, 40 percent of gross investment was accounted
for by land improvement – that is clearing, breaking, irrigating, draining and
fencing new areas of land to make them productive. Figure 1 displays the stock
of improved land. Note how the bulk of improved-land accumulation took place
in the West. Note also the magnitude of the increase: one cannot view land as
a fixed factor during the nineteenth century in the United States.
Interestingly, the technology for transforming raw land into productive land
got better during the century. In other words, a settler in 1900 would improve
more acres of land in one day of work than in 1800. Thus, the cost of settling
down into the West decreased partly because of technological progress in land-
improvement techniques. Primack (1962a,b, 1965, 1969) measured the gain in
labor productivity in the various activities contributing to land improvement.
Such numbers are unusual to the macroeconomist. For this reason, some details
are given below.

2.2.1 Clearing
Consider the clearing and first-breaking of land. What would technological
progress, and therefore productivity growth, be like in this activity? Note that
it depends on the nature of the soil: clearing an acre of forest or an acre of
grassland are two different tasks.
Two methods were common to clear forested areas: the “Swedish” or “Yan-
kee” method and the “Indian” or “Southern” method. The Swedish method
consisted mainly in cutting down trees, and then piling and burning the wood.
Part of the trees, along a fence line, where cut down but reserved for fenc-
ing. Two firings were often needed so that the entire process could take several
months. The Indian method consisted in girdling the trees by stripping the bark
from a section around it. If done during the winter, the tree would die and start

4
loosing its limbs by the next spring. Eventually, the whole tree would fall. Both
methods left the ground studded with stumps. Early frontiersmen would leave
the stumps to rot for a few years and then remove them with the aid of basic
tools: ax, lever and a yoke of oxen if they had one. Later, mechanical stump-
pullers and blasting powder would help them to finish up the land-clearing more
quickly. Productivity gain could also have come from specialization. As Pri-
mack (1962a) explains, clearing the land usually required much more manpower
than individual settlers had available. Groups of settlers would then gather and
help each other so that the newcomer did not have to learn and do everything
by himself.
Grassland clearing was easier. Yet, the prairie soil required a special kind of
plow and a team of four to eight oxen to be first broken. Many settlers did not
have the necessary knowledge or material. Hence professionals were commonly
hired to break virgin land. According to Primack (1962a), the introduction of
an improved breaking plow and its acceptance by farmers, mainly after the civil
war, was the main source of productivity increase in grassland clearing.
Table 1 reports data on land-clearing productivity. It took about 32 man-
days to clear an acre of forest in 1860 and 1.5 man-days for an acre of grassland.
By 1900 these numbers dropped to 26 and 0.5, respectively. One is naturally
led to ask what was the proportion of land that was cleared, each period, from
different types of coverage. In 1860, 66 percent of the acres cleared were initially
under forest cover and 34 percent under grass cover. These numbers changed as
more western territories got settled. In 1900, just 36 percent of the land cleared
was initially under forest cover, the rest was grassland.
Settlers could choose the type of land they cleared. Hence, the change in
labor needed to clear an “average acre” not only captures technological progress,
but also the substitution from forest toward prairie. Using a Tornqvist index
to correct this effect, one finds that the annual growth rate of productivity in
land-clearing, for the period 1860-1900, was 0.6 percent.3 This figure compares,
for instance, with the 0.7 percent annual rate of total factor productivity growth
during the same period – see Gallman (2000).
3 Let f represents the share of forest in a representative acre at date 0. Let hf and hp
0 0 0
represent the labor requirement to clear an acre of forest and prairie at date 0, respectively.
The share of forest-clearing in the total cost of clearing is

f0 hf0
ω0 = .
f0 hf0 + (1 − f0 )hp0
The Tornqvist index, for the change in the labor requirement between date 0 and 1, is defined
as à f! µ ¶ µ p¶
ω0 + ω1 h0 ω0 + ω1 h0
ln T = ln + 1 − ln .
2 f
h1 2 hp1
The growth rate of productivity between date 0 and 1 is then T − 1.

5
2.2.2 Fencing
A second component of farm improvement is the construction of fences. Pri-
mack (1969) shows that the cost and time required for fencing a farm was far
from negligible, and a subject of continuous discontent for farmers. Initially,
fences were made out of natural materials adjacent to the site: wood, stones or
brushwood. This material was not always abundant depending on the region.
Or, it was simply not convenient at all. For example, stone fences were cheap
but difficult to build, and even more difficult to move if the enclosed area had to
be extended. Consequently, throughout most of the nineteenth century, farmers
have sought out better fencing devices. The major cause of productivity gain
in fencing was the shift from wood to wire fences. A well known example of a
technological innovation can be found here: barbed wire, invented and patented
by Joseph F. Glidden in 1874. The effects of such an innovation are quite ob-
vious: barbed wire is light, easier and faster to set up than wood fencing, and
withstand fires, floods and high winds. Primack (1969) reports that the fraction
of time a farmer devoted to maintaining and repairing fences dropped from four
percent in 1850 to 1.3 percent in 1900. Although, strictly speaking, this is not
fence-building, it still conveys the idea that fences became easier to handle and
a lighter burden on the farmer.
Table 2 reports data on fencing productivity. It took about 0.31 man-days
to build a rod of wooden fence in 1850. This number remained unchanged until
1900. Stone fences required two man-days per rod and, here again, this number
remained constant until 1900. In 1860, wire fences were made out of straight
wire, which required about 0.09 man-days per rod. This requirement dropped
to 0.06 man-days in 1900, thanks to the use of barbed wire.4 The shares of
wood, stone and wire fences in total fencing are also reported in the table. A
calculation similar to the one carried out in the case of land-clearing reveals
that the annual growth rate of productivity in fencing was 0.5 percent between
1860 and 1900.

2.2.3 Draining and Irrigating

The last two activities, drainage and irrigation, did not undergo any productivity
gains during the second half of the century. Primack (1962a) argues that, in
both cases, the labor requirements for laying one rod of drain or irrigating an
acre of land remained constant from 1850 to 1900.

2.3 Hypothesis
What are the mechanism at work behind the Westward Expansion? It is prob-
ably fair to say that there exists a standard view on this matter which is as
4 Source: Primack (1962a, p. 82). The figure for the productivity in wooden fences building

is the average of the labor requirement for three types of fences: The “Virginia Rail:” 0.4
man-days, the “Post and Rail:” 0.34 and the “Board:” 0.20. A rod is a measure of length:
16.5 feet. The posts supporting a fence are usually one rod apart.

6
follows: the abundance of western land, and thus its low price attracted set-
tlers.5 This is not fully satisfactory for three reasons. First, and to the best of
my knowledge, there are no quantitative assessment of the importance of this
channel. Second, if raw land was indeed cheap, the cost of transforming it into
improved land had to be paid anyways. As mentioned above, this cost was
significant enough to represent 40 percent of total investment during the 1830s.
Finally, and as explained before, western improved land was not in fixed quan-
tity but rather the result of investment decisions. Viewing productive land as
an endogenous variable means that its “abundance” cannot be a driving force.
It is, on the contrary, a fact that one has to account for.
Another view emphasizes population growth. Observe Figure 1 and the fact
that Eastern land was essentially a fixed factor as of 1800. As population grew,
because of natural increase and immigration, eastern wage growth slowed down
due to the decreasing returns implied by the fixed stock of land. The existence
of the West offered the possibility of increasing the total stock of land, and
therefore permitted wage growth to be faster. This view is akin to the “safety
valve” hypothesis of Turner (1920).6
A third approach emphasizes the transportation revolution which took place
during the nineteenth century. O’Rourke and Williamson (1999) and Fishlow
(1965, 2000) describe the improvements in technologies and transportation in-
frastructures. There are two potential effects of the transportation revolution on
the Westward Expansion. First, the moving cost for settlers decreased. Second,
the cost of shipping goods to and from the West decreased too. Consequently,
this reduced the economic isolation of westerners: they could sell their goods on
the large markets of the Atlantic coast and purchase consumption and invest-
ment goods produced there at lower costs. An important consequence of the
decrease in transportation costs is the convergence of regional real wages – see
Figure 3.
The view that the transportation revolution could explain the Westward
Expansion suggests that other form of technological progress could also do the
same. In particular, technological progress in land-improvement techniques and
in the production of goods could also have affected the Westward Expansion. For
instance, improvement in total factor productivity raised the marginal product
of land and labor in the West. However, productivity growth could also have had
negative effects. In the East, technological progress allowed wage and consump-
tion growth, despite population growth and decreasing returns. As a result,
technological progress slowed down the Westward Expansion by reducing the
need to increase the stock of land. The final effect of such changes is ambiguous
a priori, and must be investigated quantitatively, using a formal model.
5 Turner(1920), whose thesis on the American Frontier changed the way scholars envision
American history, thought that free land was of great importance. He wrote:
The existence of an area of free land, its continuous recession, and the advance
of American settlement westward explain American development.

6 The safety valve hypothesis asserts that the opportunities one could find in the West

defused social and economic discontent in America.

7
3 The Model
How do population growth and the various forms of technological progress inter-
act? What are their respective contributions to the Westward Expansion? To
answer such questions, this section presents a model incorporating these mech-
anisms. To clarify the exposition, the first version of the model is static, and
it is analyzed through a set of numerical examples. Section 3.2 presents then a
dynamic version of the same model, for the purpose of the quantitative exercise
conducted in Section 4.

3.1 The Static Model

All activity takes place in a single period of time. There are two locations called
East (e) and West (w), and the commodities included are as follows: labor, a
consumption good, an intermediate good, and eastern and western land. As
will become clear later, the intermediate good serves the purpose of introducing
a transportation cost for goods, in addition to a transportation cost payed by
households.
Land exists in two states: raw and improved. Only the latter can be used
for production. All eastern land is improved exogenously. The stock of im-
proved western land, however, is determined in equilibrium. Specifically, a
land-improvement sector, which exists only in the West, hires local workers
to transform raw land into improved land. It then sells it to households who,
in turn, rent it to the western consumption-good sector.
Each location produces the consumption good with labor, the intermediate
good and improved land. However, only the East produces the intermediate
good, with labor. Thus, the western consumption-good sector faces a trans-
portation cost to use the intermediate good.
At this point, it is important to lay out the structure of ownership of land and
firms. There is a mass p of identical agents, supplying inelastically one unit of
time to the market. Each agent is endowed with an equal fraction of the property
rights over eastern land and the various firms in the economy. Regardless of their
location, households can purchase property rights over western improved land,
from the land-improvement sector.
Households choose their location and sector of activity. To summarize, they
can work in the consumption-good sector in the East or the West, in the western
land-improvement sector or, finally, in the eastern intermediate-good sector.
There are no costs associated with changing sector within a location. It is costly,
however, to change location. Table 3 summarizes the sectors, their inputs and
locations.

3.1.1 Firms
Intermediate Good A constant-returns-to-scale technology is used to pro-
duce intermediate goods from labor:
x = zx hex .

8
The variable x denotes the total output of the sector, zx is an exogenous pro-
ductivity parameter and hex is eastern labor. Let qx denote the price of x in
terms of the consumption good. The eastern consumption-good sector pur-
chases x at no other cost than qx . The western consumption-good sector faces a
transportation cost, though. For one unit of the intermediate good, the western
consumption-good sector faces a price qx (1 + τx ). The difference, qx τx , is lost
during shipment – an iceberg cost. Hence, the marginal revenue of the firm is
qx , regardless of the final destination of the good. Its objective is then

max {qx x − we hex } , (1)

where we denotes the eastern real wage rate.

Consumption Good Labor, intermediate goods and improved land are used
to produce the consumption good:
¡ ¢µ ¡ j ¢φ ¡ j ¢1−φ−µ
y j = zy hjy x l , µ, φ ∈ (0, 1) .

In this expression, the superscript j refers to location (j = e, w). The variable hjy
refers to labor employed in the consumption-good sector in location j. Inputs of
the intermediate good and improved land are denoted by xj and lj , respectively.
The term zy is the total factor productivity of the sector. It is the same in each
location. The objective of the eastern sector is
© ª
max y e − we hey − qx xe − re le (2)

where re denotes the rental price of improved land. The western sector solves
© ª
max y w − ww hw w w w
y − qx (1 + τx ) x − r l . (3)

Improved Land Eastern land is entirely improved, therefore the land-improvement

sector exists only in the West. There, the total stock of land is fixed and repre-
sented by the unit interval. In equilibrium, it is partitioned between improved
and raw land. The land-improvement sector decides this partition. At this
point, it is important to distinguish between the stock of improved land itself
and the production services it delivers to the consumption-good sector. The
former is measured by the length of a subset of the unit interval, while the
latter is measured in efficiency units. This distinction is used to introduce the
notion that land is not homogenous. Specifically,R the efficiency units obtained
from improving an interval I ⊆ [0, 1] is given by I Λ (u) du, where Λ is a den-
sity function, assumed to be decreasing. Assume, further, that land is improved
from 0 to 1. Thus, a stock of improved land of size l ∈ [0, 1] means that the
interval [0, l] ⊆ [0, 1] is improved and that the efficiency units of land used in
production in the West amount to
Z l
w
l = Λ (u) du.
0

9
The function Λ is given the following particular form

Λ (u) = 1 − uθ , θ > 0.

One can interpret the assumptions that Λ is decreasing and that land is improved
from 0 to 1 as a shortcut for modeling the fact that the “best” land is improved
first. This modeling strategy also ensures an interior solution: land close to 1
delivers close to 0 efficiency units after improvement.
The technology for improving land up to point l requires labor and is repre-
sented by
l = zl hw
l (4)
where zl is a productivity parameter and hw w
l is employment. Let q denote the
price of an efficiency unit of western land. The optimization problem of the firm
is ( Z )
l
π = max q w Λ (u) du − ww hw w
l : l = zl hl , (5)
0

and the first order condition is

ww
q w Λ (l) = .
zl
The left-hand side of this expression is the marginal benefit obtained from the
last parcel of land improved, i.e., the efficiency units obtained from this parcel
multiplied by their market price. The right-hand side is the marginal cost of
improvement. Figure 4 represents the determination of the stock of improved
land. Three variables affect it: the western wage rate, the productivity of the
land-improvement technology and the price at which efficiency units of land
are sold. An increase in the wage rate makes land improvement more costly
and, therefore, affects it negatively while productivity plays the opposite role.
Finally, an increases in the price of efficiency units of land raise the marginal
revenue from land improvement and affects it positively.

3.1.2 Households
Households have preferences represented by U (c), a twice continuously differen-
tiable, increasing and strictly concave function. Imagine that before any activity
takes place the population is located in the East. The optimization problem of
a household deciding to remain there is given by
½ ¾
1
V e = max U (ce ) : ce = we + (re le + π)
p

where ce stands for consumption. As mentioned earlier, households are endowed

with property rights over eastern land and the firms. Thus, they receive a
fraction 1/p of the returns to eastern land, re le , and the profit of the land-
improvement sector, π. (The consumption-good and intermediate-good sectors

10
have zero profit in equilibrium.) A household deciding to live in the West faces
a similar problem:
½ ¾
w w w w 1 ee
V = max U (c ) : c = w − τh + (r l + π)
p
where τh is the cost of moving from East to West.
Observe that western improved land does not appear in the budget constraint
of households. The reason is the following: suppose a household buys one unit
of western improved land at price q w from the land-improvement sector, and
rents it at rate rw to the consumption-good sector. In equilibrium, households
buy land up to the point where rw = q w . Thus, this operation does not appear
in the budget constraint. Western land does, however, deliver income through
the profit of the land-improvement sector.
The decision of a household is his location:

max {V e , V w } . (6)

Denote by hw and he the number of agents who decide to live in the West and
in the East, respectively.

3.1.3 Equilibrium
The equilibrium conditions on the eastern and western labor markets are hey +
hex = he and hw w w
y + hl = h , respectively. The condition on the intermedi-
w e
ate goods market is x + x = x. Finally, the equilibrium condition on the
consumption good market is

he ce + hw cw + hw τh + q x τx xw = y e + y w .

The equilibrium is a list of allocations for firms: {hw w w w e e w

y , x , l }, {he , x , l }, {hl },
e w e w e
{hx }; prices: {qx , r , r , w , w }; and a location choice for households, such
that: (i) problems (1), (2), (3), (5) and (6) are solved given prices; (ii) markets
clear.

3.1.4 Analysis
One can understand the mechanisms at work in the model through a set of
numerical examples. First, one needs to choose parameters (see Table 4) and
compute a baseline equilibrium. One can then compute additional equilibria,
each of them associated with a change in a single exogenous variable at a time.
For instance, the first experiment consists in increasing population from 10 to
15, holding other variables at their baseline level. In the second experiment
population is at its baseline level but the transportation cost for households, τh ,
is 0.05 instead of 0.1. Other experiments consist in decreasing the transportation
cost for goods, and increasing the productivity parameters, zy , zx and zl . Table 5
shows that each experiment results in an increase of the percentage of population
living in the West, and the stock of improved land.

11
 When population increases, as in the first experiment, the demand for con-
sumption goods increases, and the opening of more land in the West is justified
to satisfy this demand. Land improvement requires labor, so western popula-
tion increases. Simultaneously, the larger stock of productive land implies a
higher marginal product of labor in the west, and therefore the demand for
western workers increases. Observe the drop in wages, due to increased labor
supply. Note, finally, that the return to western land increases. On the one
hand more land is used for production, so its marginal return tends to decrease.
On the other hand more labor and intermediate goods are employed too, rais-
ing the marginal product of land. In this particular example, the second effect
dominates.
Reduction in transportation costs have expected effects. First, the trans-
portation cost for households dictates the East-West wage gap. As it declines,
more households move to the West, reducing the wage rate there and increasing
it in the East. Second, a reduction in the transportation cost for intermediate
goods induces the western firm to use more of it. This results in an increase in
the marginal product schedules for western land and labor and, in turn, raises
the demand for labor and improved land.
Productivity growth in each sector also promotes the development of the
west. Consider first the consumption-good sector. When zy increases, the return
to western land rises inducing an increase in the stock of improved land. This, in
turn raises the demand for labor. Note that, at the same time, an increase in zy
reduces the need for western land, since it makes eastern land more productive.
However, this effect does not dominate in this particular example. An increase
in zx tends to reduce the price of intermediate goods, making it cheaper for the
western consumption-good sector to use it. Then, as in the case of a drop in the
transportation cost, the marginal product, and therefore the demand, for labor
and land increase. Finally, an increase in zl directly promotes land improvement
which attracts workers to the West.

3.2 The Dynamic Model

Consider a dynamic version of the model, where all the mechanisms described
above are incorporated. Let time be discrete and indexed by t = 1, . . . , ∞. The
new ingredients of this version are as follows. First, the land-improvement sector
solves a dynamic problem: given that the stock of improved land at the begin-
ning of t is lt , what should lt+1 be? Second, there is a government which owns
the initial stock of raw land. It sells it to the land-improvement sector which, as
in the static version, improves it and sells it to households. The revenue from
selling raw land is transferred to households. This device simplifies the model
since one does not have to model the market for raw land. Third, the demogra-
phy has to be clearly specified. The choice is to represent population as a set of
overlapping generations, and to specify an exogenous mechanism for its growth.
Within each age group one can find three types of agents. Those who spend
their life in a single location, East or West, and those who move from one loca-
tion to the other, the latter being called “movers.” Fourth, there are economy

12
wide markets for western and eastern improved land. Fifth, the consumption-
good and intermediate-good sectors solve static problems, hence they are still
described by Equations (1)–(3). Finally, the exogenous productivity variables,
evolve in line with zyt = γzy zy,t−1 , zxt = γzx zx,t−1 and zlt = γzl zl,t−1 and the
transportation costs with τht = γτh τh,t−1 and τxt = γτx τx,t−1 .

3.2.1 Improved-land
The physical description of western land is the same as in the static version of
the model. The stock of improved land, however, changes according to
lt+1 = lt + zlt hw
lt .

In words, each period the stock of improved land increases by a quantity which
depends on employment in the land-improvement sector. Hence, the equation
above is the dynamic counterpart of Equation (4).
At the beginning of period t, the stock of improved land, lt , is given. The
land-improvement sector decides lt+1 , or equivalently hw lt , and its profit is
Z lt+1 Z lt+1
πt (lt , lt+1 ) = qtw Λ(u)du − wtw hw
lt − qtr (u)du
lt lt

The first two elements of the profit correspond to the total revenue net of the
labor cost. They form the counterpart of the profit function described in Equa-
tion (5). The last part is the cost paid by the firm, to the government, for raw
land located in the interval [lt , lt+1 ]. The function qtr (·), represents the price of
raw land set by the government. Its description is postponed to Section 3.2.3.
The value of the sector at date 1 is
∞
à t !−1
X Y
max π1 (l1 , l2 ) + iτ πt (lt , lt+1 ) (7)
t=2 τ =2
s.t. lt+1 = lt + zlt hw
lt , t ≥ 1,
l1 given,
where iτ is the gross interest rate applied from date τ − 1 to τ . The optimality
condition for lt+1 is
µ ¶
ww 1 ww
qtw Λ(lt+1 ) − t − qtr (lt+1 ) = w
qt+1 Λ(lt+1 ) − t+1 − qt+1
r
(lt+1 ) .
zlt it+1 zl,t+1
The left-hand side of this equation is the marginal profit obtained from improv-
ing land up to point lt+1 , during period t. The right-hand side is the present
value of the marginal profit the firm would realize, if it decided to improve this
last “lot” during period t + 1 when prices and technology are at their period-
t+1 values. Along an optimal path there should be no profit opportunities from
changing the timing of land-improvement. Thus, the two sides of this equation
must be equal – this equation is an example of the so-called Hotelling (1931)
formula.

13
3.2.2 Households
Decision Problem Households lives for 2 periods, and there are three types
in each age group. First, there are those who spend their life in a single location.
They are called “easterners” or “westerners.” Second, there are those who
change location during their lives. They are called “movers.” Preferences are
defined over consumption at age 1 and 2, c1 and c2 , and are represented by

ln(c1 ) + β ln(c2 )

where β is a discount factor.

The decision to be a mover is made only once in life. Consider the case of
an agent who wants to move from East to West. Moving takes place at the
beginning of the first period of life and costs τht units of the consumption good.
If the agent elects to move, he works in the West throughout his life. He differs
from a westerner who does not pay the cost of moving, though. As will become
clear shortly, moving takes place only from East to West. Thus, in what follows,
the term “mover” always refers to this particular direction.
Denote the consumption of an age-a household of type j (j = e, w, m) during
period t by cjat and the value function of a type-j household of age 1 at t by Vtj .
One can write:
n ³ ´ ³ ´o
Vtj = max ln cj1t + β ln cj2,t+1 (8)
cj2,t+1 wj
s.t. cj1t + = wtj + t+1 + Tt
it+1 it+1
for j = e, w, that is for households who do not move during their lives, and
© ¡ m ¢ª
Vtm = max ln (cm 1t ) + β ln c2,t+1 (9)
m w
c2,t+1 w
s.t. cm
1t + = wtw + t+1 + Tt − τht
it+1 it+1

for j = m, that is for movers going from East to West.7 The term Tt is a transfer
received from the government at age-1.
In equilibrium, an age-1 agent in the East at date t must be indifferent
between moving to the West or staying. Thus,
w e
wt+1 − wt+1
wtw − wte + = τht . (10)
it+1
In words, the present value of income, net of the moving cost, for an agent just
settling down into the West must be the same as for an agent of the same age
who stays in the East. Observe that Equation (10) implies that households
move only in the westward direction. No household would pay to move from
West to East, where the present value of income is lower.
7 Observe that there is an abuse of notation here, since j does not refer to the location but

to the type.

14
Demography Let pt denote the size of the age-1 population, so that total
population is given by pt + pt−1 . Population growth has two sources: natural
increase and international immigration. Denote the rates of natural increase
in the West and the East by nw and ne , respectively. Those rates are location
specific to capture the differences observed in the U.S. data – see Yasuba (1962).
Denote the rate of international immigration by f . Finally, let pw e
t and pt denote
the number of age-1 households located in the West and the East, respectively.
Their laws of motion are
pw w w
t+1 = (n + f )pt + mt (11)
and
pet+1 = (ne + f )pet − mt . (12)
where mt is the number of age-1 households deciding to move to the West during
period t. Define ωt = pw
t /pt , the proportion of age-1 households located in the
West at date t. The law of motion for the age-1 population is then described by
pt+1
= nw ωt + ne (1 − ωt ) + f. (13)
pt

3.2.3 Government
How does the government price unimproved land? Here, the choice is to assume
that it sets the price that would prevail if unimproved land was privately owned
and traded on a market.8 This dictates the following:

 undefined for u < lt ,
qtr (u) = qtw Λ(u) − wtw /zlt for u ∈ [lt , lt+1 ], (14)
 r
qt+1 (u)/it+1 for u ≥ lt+1 .
Observe first that, at the beginning of period t, all the land up to lt has already
been improved. Therefore, there is no unimproved land before that point. Sec-
ond, note that integrating qtr (u) over the interval [lt , lt+1 ] returns a zero-profit
condition. In other words, the difference between the value of improved and
unimproved land is the cost of improvement. The last part of the definition
of qtr (u) is a no-arbitrage condition. Consider a lot, du, that is not improved
during period t and remains as such at the beginning of period t + 1. This is the
case for all u satisfying u ≥ lt+1 . What would be the return on such lot, if it
was traded on a market? By definition, unimproved land is not productive and
r
therefore the return is qt+1 (u)/qtr (u). In equilibrium, this return must equal the
gross interest rate, it+1 .
Under this policy, the first order condition of the land-improvement sector
now reads µ w ¶
w wtw 1 w wt+1
qt Λ(lt+1 ) − = qt+1 Λ(lt+1 ) − .
zlt it+1 zl,t+1
8 In an infinitely-lived, representative-agent model, this would mimic the equilibrium that

would prevail if unimproved land was privately owned and traded on a market. In an overlap-
ping generations model the equilibrium will be influenced by the timing of transfer payments
to the agents or {Tt }∞ t=1 .

15
Specifically, when virgin land is priced competitively, the decisions of buying
land and improving it can be separated. This should not be surprising. As long
as the no-arbitrage condition described above holds, the firm cannot reduce
the present value of its cost by reallocating its purchases of raw land through
time. The value of the land-improvement firm depends only on the timing of
land-opening itself.
The revenue collected from selling virgin land is distributed via the transfer
Tt to young households. The government’s budget constraint is then
Z lt+1
Tt pt = qtr (u)du. (15)
lt

The introduction of the government allows one to avoid modeling explicitly

the market for shares of the land-improvement firm. As the second line of
Equation (14) makes clear, the profit of the land-improvement sector is captured
by the government and redistributed to the age-1 population.

3.2.4 Equilibrium
In equilibrium, the gross rates of return on improved land must be identical
across locations. Hence, the gross interest rate is given by
j j
rt+1 + qt+1
it+1 = , j = e, w. (16)
qtj
Several market-clearing conditions have to hold: first, the eastern labor market
must clear:
pet + pet−1 = heyt + hext . (17)
The left-hand side of this equation represents the total eastern population at
date t, that is the labor supply. The demand, on the right-hand side, comes
from the consumption-good and the intermediate-good sectors. In the western
labor market, a similar condition must hold:
pw w w w
t + pt−1 = hyt + hlt . (18)
The market for intermediate goods is in equilibrium when
xw e
t + xt = xt (19)
and, finally, the market for the consumption good clears when
ct + mt τht + qxt τxt xw w e
t = yt + yt . (20)
Total consumption, ct , is given by the sum of consumption of all agents.9 A
competitive equilibrium can now be formally defined.
9 To be precise, let mjt (j = e, w, m) be the number of age-1 agents of type j at date t:
mw
t = (nw + f )pw
t−1
met = (ne + f )pet−1 − mt
mm
t = mt .

16
Definition 1 A competitive equilibrium is made of: (i) allocations for house-
holds {cjat } for j = e, w, m and a = 1, 2 and firms {hw e w e w e e w
yt , hyt , hlt , hxt , xt , xt , l , lt };
(ii) prices {wtj , rtj , qtj , qxt , it , qtr (·)} for j = e, w; and transfers {Tt } such that:
1. The sequence {hext } solves (1) at all t ≥ 1, given prices;
2. The sequence {heyt , xet , le } solves (2) at all t ≥ 1, given prices;
3. The sequence {hw w w
yt , xt , lt } solves (3) at all t ≥ 1, given prices;

4. The sequence {hw

lt } solves (7) at all t ≥ 1, given prices;

5. The sequences {cw e

at } and {cat } solve (8) at all t ≥ 1, given prices; the
m
sequence {cat } solves (9); and households choose their location optimally,
or (10) holds;
6. Population evolves in line with (11) and (12);
7. The government prices unimproved land according to (14), and its budget
constraint (15) holds.
8. The equilibrium conditions (16)-(20) hold.

3.2.5 Balanced Growth

In the long-run, land becomes a fixed factor in the West as it is inRthe East.
1
In other words, the land-improvement sector shuts down and ltw → 0 Λ(u)du
as t → ∞. Suppose that the rates of natural increase are the same across
regions: nw = ne = n. Assume, finally, that the transportation costs, τht and
τxt are negligible – which is true if γτh , γτx ∈ (0, 1), that is if transportation costs
decrease through time. Then, the economy moves along a balanced growth path
which can be described as follows. First population growth is constant and is
the same across locations:
γp ≡ pw w e e
t /pt−1 = pt /pt−1 = n + f.

Employment in each sector, hw e e

yt , hyt , and hxt , grows at rate γp too. Conse-
quently, the production of intermediate goods grows at the (gross) rate γx =
γp γzx , resulting in the production of the consumption good growing at the same
rate in each location:
γy = γzy γzφx γpφ+µ .
The wage rate is the same in each location and is growing at rate γy /γp . The
rental rate for land in each location increases at rate γy as well as the price of
land. This implies, through Equation (16), a constant interest rate along the
balanced growth path.
Age-1 westerners are born (or arrived from abroad) in the West (first equation); age-1 eastern-
ers are born (or arrived from abroad) in the East but decided not to move (second equation);
the number of movers is defined as mt . Total consumption is
ct = mw w w w e e e e m m m m
t c1t + mt−1 c2t + mt c1t + mt−1 c2t + mt c1t + mt−1 c2t .

17
4 Computational Experiment
This section contains two parts. In the first, the parameters are assigned nu-
merical values, and the strategy in this respect is twofold. First, a priori in-
formation is used to assign values to the factor shares, (φ, µ), the growth rate
of productivity in the three sectors (γzy , γzx , γzl ), the rate of decline of trans-
portation costs (γτh , γτx ), the initial value of the transportation cost for goods
τx1 and the demographic parameters (f, nw , ne ). The remaining parameters,
(β, θ, le , τh1 , zy1 , zx1 , zl1 ), are chosen to minimize a measure of the distance be-
tween the model’s predictions and the actual ratio of western to total population,
stock of improved land and ratio of western to eastern real wages. This particu-
lar procedure implies that the fit of the model to the data is not a finding of the
exercise, but rather imposed at the onset.10 The findings of the quantitative
analysis of the model are described in the second part of this section, through
a set of counterfactual experiments. Given that the model captures the mecha-
nism that generated the Westward Expansion, as imposed in the first part, how
important are each driving force?

4.1 Parameters’ Values

4.1.1 Using a Priori Information
Let a model period correspond to 10 years. The exogenous driving forces are
productivity variables: {zyt , zlt , zxt }, and transportation costs: {τht , τxt }. To
characterize these trajectories, one needs initial conditions and rates of change.
Set the growth rate of zyt to 0.55 percent from 1800 to 1840 and 0.71 percent
from 1840 onward, as indicated by Gallman (2000, p. 15). Set the growth rate
of zxt to the same values. For productivity in the land-improvement sector,
use 0.6 percent annual growth from 1860 onward, as suggested in Section 2.
Unfortunately, there are no data on technological progress in land-improvement
during the antebellum period. The strategy is then to use labor productivity
in agriculture as a proxy. Atack, Bateman, and Parker (2000) report that it
grew at an annual rate of 0.3 percent per year from 1800 to 1860. O’Rourke
and Williamson (1999, p. 36) mention a 1.5 percent annual rate of decline
for transportation costs. Use this number for both transportation costs in the
model. Set the initial value of the transportation cost for goods to 50 percent,
which corresponds to the price difference for wheat between the east and the
midwest at mid-century – see Herrendorf, Schmitz, and Teixeira (2006). The
choice of the remaining initial conditions is described later.
Set the labor share to µ = 0.6 and the intermediate goods share to φ = 0.2,
implying a land share of 20 percent. These numbers are derived from Gallman
(2000, p. 15). Gallman’s growth accounting exercise is particularly relevant
here because he uses the increasing stock of improved land depicted in Figure 1.
This measure is also used below, when fitting the model to the data. Note that,
strictly speaking, it is not clear that the intermediate goods share should be the
10 To the extent, of course, that the fit is acceptable. Figure 5 gives a sense of this.

18
same as the capital share. In the model, however, the period is ten years so that
one can interpret x as a capital good produced in the East, which fully depre-
ciates in 10 years. In the literature, one can find factor shares in a large range
of values. For example, Restuccia, Yang, and Zhu (2006) use the agricultural
literature to calibrate an agricultural production function. Their land share is
20 percent and their labor share 40 percent, which is significantly less than what
is suggested by Gallman’s for the aggregate production function. Herrendorf,
Schmitz, and Teixeira (2006) also calibrate an agricultural production function
and use a labor and land share and of 40 percent both, implying an interme-
diate goods share of 20 percent. The preference is given to Gallman’s figures
for the reason mentioned above and because φ and µ pertain to the aggregate
production function.
Using Haines (2000, p. 153), set the rate of net migration, f , to 5 percent, its
average level in the U.S. data for the period 1800-1900. Yasuba (1962) reports
information on the birth ratio by state and census year between 1800 and 1860.11
There is a great deal of variation in this data, but one clear pattern emerges: the
larger birth ratio of western women compared with women living in the East. As
discussed in Section 2.1, this difference does not imply a higher rate of natural
increase in the West. Yet, for the purpose of the quantitative exercise, the rates
of natural increase nw and ne can differ. This is a conservative choice since it
reduces the importance of migration (an endogenous mechanism in the model)
in the determination of the geographical distribution of population. How to pick
nw and ne ? First pick ne . Yasuba indicates that the birth ratios observed in
Vermont, Maine, New Hampshire, New York, New Jersey and Pennsylvania are
bout 2.0 in 1800. This figure implies a rate of natural increase ne = 1 + 2.0/10.
Given f = 0.05, ne = 1.2 and the observed ratio of western to total population,
one can use Equation (13) to find nw such that total population would be
multiplied by 13.6 in the model (as in the U.S. data) if it replicated exactly the
ratio of western to total population from 1800 to 1900. This calculation leads
to nw = 1.3.

4.1.2 Minimization
The rest of the parameters are estimated using U.S. data. Before describing
this procedure, one must first describe the nature of the computational exercise.
Think of starting the economy off at date t = 1, that is 1800. At this point,
the stock of improved land in the West, l1 , is the result of past investment
decisions and, thus, it is given. Set l1 to the actual ratio of the stock of western
improved land in 1800 to its value in 1900: six percent. Normalize the initial old
population to one, and assume that there are no old households in the West at
date 1. Thus, the initial young population is p1 = ne + f . From date 1 on, feed
the driving variables into the model for a length of 50 periods. Only the first 10
periods are of interest to the quantitative exercise, since they represent the U.S.
from 1800 to 1900. Over the remaining 40 periods, gradually reduce the values
11 The birth ratio is the number of children under 10 years of age, per women aged 16-44.

19
of nw and ne to capture the fact that there has been no discernable differences in
regional fertility rates during the twentieth century. Let the remaining driving
variables grow at the rates just described.12 The model economy converges to
its balanced growth path in the long-run.
Define a ≡ (β, θ, le , τh1 , zy1 , zx1 , zl1 ), which is the list of remaining parame-
ters: the discount factor, the curvature parameter (of the density of efficiency
units of land), the stock of improved land in the East, and the initial values for
the transportation cost for households and productivity paths. For a given a the
model generates times series for the ratio of westerners, the stock of improved
land and the ratio of western to eastern wages. Namely, define
pw w
t + pt−1
P̂t (a) =
pw w e e
t + pt−1 + pt + pt−1

Q̂t (a) = lt
R̂t (a) = wtw /wte

Let Pt , Qt and Rt be the empirical counterparts of P̂t , Q̂t and R̂t . The sequence
Qt is built by normalizing the stock of western improved land (Figure 1) by its
1900 value. The sequence Pt and Rt are displayed in Figures 1 and 3.
The choice of a is the result of a grid search to solve
X X X
min (P̂t (a) − Pt )2 + (Q̂t (a) − Qt )2 + (R̂t (a) − Rt )2 + (i1900 (a) − 1.0710 )2
a
t∈T t∈T t∈T

where T ≡ {1800, 1810, . . . , 1900}.13 The first and second terms of this distance
involve the sum of square differences between the actual and predicted stock of
land and ratio of westerners. The third term involves the wage ratio – this is
important for the determination of the initial value τh1 . The last term involves
i1900 , the real interest rate at the end of the period – this is important for the
determination of the discount factor β. The value 1.0710 correspond to a seven
percent annual interest rate.14 Figure 5 indicates the model’s fit to the U.S.
data and Table 6 reports the baseline parameters.

4.2 Findings
Under the parameters of Table 6 the model matches the U.S. data reasonably
well. One can now use it to ask what are the quantitatively important forces
behind the Westward Expansion? To do this, Figures 6 and 7 report the results
of six counterfactual experiments. In each experiment a particular driving force
is restricted to remain constant at its initial level, while the others are either
12 The appendix provides the details of the computational procedure.
13 Note that there is no data for the stock of improved land in 1820 and 1830, and that the
data for the wage ratio are for the periods 1830-1880.
14 In 1900, the model is very close to have reached its steady state where the interest rate is

constant. Thus, the correct interest rate target should be a twentieth century rate of return.
The choice, here, is to use seven percent, following Cooley and Prescott (1995)’s figure for the
second half of the twentieth century.

20
growing or decreasing as in the baseline case. In the first experiment, for exam-
ple, the equilibrium path of the economy is computed without any population
growth. More precisely, nw and ne are set to unity and f to zero. The only
forces driving the Westward Expansion are then the technological variables in
production and transportation. In the second experiment, population grows as
in the baseline case, but there is no productivity growth in the consumption-
good sector: zyt = zy1 for all t. The third experiment shuts down productivity
growth in the land-improvement technology: zlt = zl1 for all t. In the fourth
experiment, it is the productivity variable in the intermediate goods produc-
tion which is not growing: zxt = zx1 for all t. Finally, experiment five and six
correspond to shutting down the decline in transportation costs for households
(τht = τh1 ) and goods (τxt = τx1 ), respectively.
The central message from Figures 6 and 7 is that there are two main forces
driving the Westward Expansion: the decline in transportation costs (applied
to households, that is τht ) and population growth. The decline in the cost of
transportation for households affects mostly the distribution of population, but
it has a smaller effect on the accumulation of western land. Population growth,
on the other hand, affects mostly the accumulation of land, and has a small
effect of the distribution of population.
Specifically, Table 7 reports two measures of the difference between the base-
line calibration and the counterfactual experiments. Columns labeled a indicate
the sum of squared differences between the baseline trajectories and the coun-
terfactuals (for the ratio of westerner and the stock of improved land.) They
confirm the informal discussion of Figures 6 and 7 above: experiments 1 and 5
cause the biggest departures from the baseline case. Columns labeled b indicate
the ratio of the 1900 value of each variable to their value in 1900 in the baseline
calibration. These columns indicate that, without population growth, the stock
of western improved land in 1900 would have been 45 percent of what the base-
line model predicts, while the ratio of westerners would have been 97 percent of
the baseline prediction. Without technological progress in transportation, the
ratio of westerners in 1900 would have been 52 percent of the baseline prediction
while the stock of improved land would have accumulated up to 89 percent of
the baseline case.
The interpretation of these results follows the same logic as with the static
model of Section 2.1. The importance of population growth for the accumulation
of western land originates from the fact that eastern land is fixed. As the demand
for the consumption good increases because of population growth, decreasing
returns in the East makes it more expensive to satisfy this demand. Then,
the opening of more western land becomes optimal. The effect of τht on the
movement of population is straightforward. The fact that it does not affect
the development of western land, whereas population growth does, is another
indication of the importance of the decreasing returns in the East.
Technology variables such as zyt and zxt have little effects on the accumu-
lation of western land. However, as far as the distribution of population across
regions is concerned the growth of zyt plays a noticeable role, although it is
quantitatively smaller than the role played by τht . Without growth in zyt , that

21
is with no total factor productivity growth, the ratio of western to total pop-
ulation is uniformly below its baseline trajectory, and reaches 92 percent of its
baseline value in 1900. To understand, note that in the absence of growth in zyt
real wages are decreasing because of population growth. This, on the one hand,
tends to push households toward the West where they can develop land to make
up for the lack of eastern productivity growth. But, on the other hand, they
still face the transportation cost which must be paid out of a decreasing wage.
Given the parameters of the model, the second effect dominates. Note, also,
that in this experiment land becomes less productive in each location which,
a priori affects labor demands in each location. Quantitatively the effect on
western labor demand is the largest. The decrease in τxt , the transportation
cost for intermediate goods has a small effect on the distribution of population.
Without any reduction in this cost, the ratio of westerners reaches 97 percent
of its baseline value in 1900. As far as the accumulation of western land is
concerned, this variables plays a negligible role. A surprising result is that the
land improvement technology, zlt , has a small effect on the accumulation of
productive land, relative to the effect of transportation or population. Without
growth in zlt , the stock of improved land in 1900 is 4 percent below its baseline
value vis à vis 11 percent when there is no decrease in transportation cost for
households, and 55 percent when there is no population growth. One can sim-
ply conjecture that this is due to the fact that, relative to other forces, labor
productivity in this activity changed little other the course of the nineteenth
century. Precisely, zlt is multiplied by a factor 1.5 between 1800 and 1900 while
population is multiplied by 13.6 and transportation costs are divided by 6.
Figure 8 indicates the effect of international immigration. The question
asked is: if no immigrants from the rest of the world entered the U.S. during
the nineteenth century, and if the rate of natural increase remained unchanged,
how different would the U.S. be in 1900? Technically, this amounts to com-
puting the equilibrium trajectory of the economy with f = 0, but nw and ne
at their baseline levels. The lesson from this experiment is that international
immigration played a small role, quantitatively. Under the assumption that
immigrants did not affect the rate of natural increase, population grows by a
factor 8.8 between 1800 and 1900 (vis à vis a factor 13.6 in the baseline case).
Quantitatively, population growth is still high enough to warrant a significant
westward movement.

5 Concluding Remarks
The Westward Expansion during the nineteenth century is one of the processes
that shaped the United States as we know it today. In particular, it determined
the geographic distribution of population and economic activity. This paper
presented an attempt at identifying the quantitatively relevant forces driving
this phenomenon. The most important forces are population growth and the
decrease in transportation costs. The latter induced the westward migration
– without it, only 30 percent of the population would be in the West in 1900,

22
vis à vis 60 percent observed. Population growth is mostly responsible for the
investment in productive land – without it less than half of the land accumulated
in 1900 would have been accumulated.
Surprisingly, productivity growth shows little effect on the Westward Expan-
sion, relative to the forces just mentioned. In the case of total factor productivity
in the consumption good sector, this is due to different effects offsetting each
others. On the one hand, the need to move to the West is not that pressing when
productivity and wages rise in the East. On the other hand, wage growth makes
it cheaper to move. In the case of productivity in the land-improvement sector,
the small effect is an unexpected result. One can conjecture that productivity
gains in this activity were too small to warrant a bigger contribution.
This paper shows that exogenous natural increase in population were high
enough to warrant the Westward Expansion, even if no immigrants came from
the rest of the world. Future work could endogenize population growth and
investigate its link to the expansion. One can make two observations. First,
international immigration from the rest of the world is essentially the same phe-
nomenon as the one studied here, within the United States. Hence, a similar
model, calibrated to different data, could shed some light on the pace of in-
ternational immigration. Second, and regarding natural increase, one faces the
challenge of explaining the highest fertility of westerners relative to easterners.

A Computation
This appendix presents the details of the computational procedure. First, as
mentioned in the text, the length of the simulation is 50 periods. The reason
is that the price of improved land is computed as the present value of future
returns, as dictated by iterating Equation (16) forward. Thus, one needs enough
periods to reduce the inevitable truncation error in this calculation.
The exogenous path for western fertility, nw , is nw = 1.3 for periods 1 to 19,
n = 1.25 for periods 20 to 34, nw = 1.2 for periods 35 to 44 and nw = 1.05 for
w

the remaining periods. Similarly, eastern fertility is set at ne = 1.2 for periods
1 to 34, ne = 1.15 for periods 35 to 44 and ne = 1.05 for the rest.
Proceed as follows to compute an equilibrium trajectory. Start with a guess
for {lt } the stock of improved land, {ωt }, the proportion of age-1 households
located in the West, {it } the interest rate and {xt } the production of the
intermediate-good sector. Use Equation (13) to build a path for total popu-
lation. (The main text describes the initial population structure and the ini-
tial value for the stock of improved land, l1 .) Use the first order and market
clearing conditions to build paths for {hw e w e w e
yt , hyt , hlt , hxt , xt , xt } which, in turn,
imply trajectories for prices {wtw , wte , rtw , rte , qxt }. Iterate Equation (16) forward
to obtain qtw , qte and qt+1 w
. For period t, solve a system of four equations in
(lt+1 , it+1 , ωt , xt ). The equations of this system are: the first order condition of
the land-improvement sector, the first order condition of the intermediate-good
sector, the market clearing condition for savings and the condition that east-
erners and movers have to be indifferent. Once this system is solved, move on

23
to solving the same problem for period t + 1. Convergence is achieved when the
final trajectories are close, according to some metric, to the initial guesses.

References
Atack, J., F. Bateman and W. N. Parker, “The Farm, the Farmer and the
Market,” in S. L. Engerman and R. E. Gallman, eds., The Cambridge Eco-
nomic History of the United States, Vol. 2 (Cambridge, England: Cambridge
University Press, 2000).
Caselli, F. and W. J. Coleman, “The U.S. Structural Transformation and Re-
gional Convergence: A Reinterpretation,” Journal of Political Economy, 109
(2001), 584-616.
Coelho, P. R. and J. F. Shepherd, “Regional Differences in Real Wages: The
United States, 1851-1880,” Explorations in Economic History, 13 (1976), 203-
230.
Cooley, T. F. and E. C. Prescott, “Economic Growth and Business Cycles,”
in T. F. Cooley, ed., Frontier of Business Cycle Research, (Princeton, N.J. :
Princeton University Press, 1995).
Fishlow, A., American Railroads and the Transformation of the Antebellum
Economy, (Cambridge, MA: Harvard University Press, 1965).
, “Internal Transportation in the Nineteenth and Early Twentieth Cen-
tury,” in S. L. Engerman and R. E. Gallman, eds., The Cambridge Economic
History of the United States, Vol. 2 (Cambridge, England: Cambridge Uni-
versity Press, 2000).
Gallaway, L. E. and R. K. Vedder, “Migration and the Old Northwest,” in D. C.
Klingaman and R. K. Vedder, eds., Essays in Nineteenth Century Economic
History: the Old Northwest, (Athens, OH: Ohio University Press, 1975).
Gallman, R. E., “The United States Capital Stock in the Nineteenth Century,”
mimeo, 1986.
, “Economic Growth and Structural Change in the Long Nineteenth Cen-
tury,” in S. L. Engerman and R. E. Gallman, eds., The Cambridge Economic
History of the United States, Vol. 2 (Cambridge, England: Cambridge Uni-
versity Press, 2000).
Greenwood, J. and A. Seshadri, “The U.S. Demographic Transition,” The Amer-
ican Economic Review, 92 (2002), 153-159.
Haines, M. R., “The Population of the United States, 1790-1920,” in S. L.
Engerman and R. E. Gallman, eds., The Cambridge Economic History of
the United States, Vol. 2 (Cambridge, England: Cambridge University Press,
2000).

24
Herrendorf, B., J. A. Schmitz, and A. Teixeira, “Exploring the Implications of
Large Decreases in Transportation Costs,” Mimeo, 2006.
Hotelling, H., “The Economics of Exhaustible Resources,” Journal of Political
Economy, 39 (1931), 137-175.

Margo, R. A., Wages and Labor Markets in the United States, 1820-1860,
(Chicago, IL: The University of Chicago Press, 2000).

Mitchell, B. R., International Historical Statistics: The Americas, 1750-1993,

4th ed. (New York, NY: Stockton Press, 1998).
Oberly, J. W., “Westward Who? Estimates of Native White Interstate Migra-
tion after the War of 1812,” The Journal of Economic History, 46 (1986),
431-440.

O’Rourke, K. H. and J. G. Williamson, Globalization and History, The Evolution

of a Nineteenth-Century Atlantic Economy, (Cambridge, MA: MIT Press,
1999).

Primack, M. L., “Farm Formed Capital in American Agriculture, 1850-1910,”

Ph.D. Dissertation, University of North Carolina, 1962a.

, “Land Clearing Under Nineteenth-Century Techniques: Some Prelimi-

nary Calculations,” The Journal of Economic History, 22 (1962b), 484-497.
, “Farm Construction as a Use of Farm Labor in the United States, 1850-
1910,” The Journal of Economic History, 25 (1965), 114-125.
, “Farm Fencing in the Nineteenth Century,” The Journal of Economic
History, 29 (1969), 287-291.
Restuccia, D., D. T. Yang and X. Zhu, “Agriculture and Aggregate Productivity:
A Quantitative Cross-Country Analysisy,” mimeo, 2006.
Turner, F. J., The Frontier in American History, (New York, NY: Henry Holt
and Company, 1920).
Yasuba, Y. (1962): Birth Rates of the White Population in the United States,
1800-1860, an Economic Study, (Baltimore, MD: Johns Hopkins University
Press, 1962).

25
 Total
400
Millions of Improved Acres of Land

West
300

200

100

0
1760 1780 1800 1820 1840 1860 1880 1900 1920
Year

Figure 1: Stock of Improved Land, 1774–1900.

Note – The source of data is Gallman (1986, Table B-5). The “East” is arbitrarily defined
as the New-England, Middle-Atlantic and South Atlantic regions. The states in these regions
are: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York,
New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia, Virginia, West Virginia,
North Carolina, South Carolina, Georgia and Florida. The West consists of all other states
in the continental U.S.

26
 1.0

0.9

0.8
Fraction of Total Population

0.7

West
0.6

0.5

0.4

East
0.3

0.2

0.1

0.0

1800 1820 1840 1860 1880 1900

Year

Figure 2: Regional Shares of Total Population, 1790–1910.

Note – The source of data is Mitchell (1998, p. 34).

27
 1860 1900
(1) man-days required to clear an acre of forest 32 26
(2) man-days required to clear an acre of prairie 1.5 0.5
(3) percent of acre initially under forest 66 36
(4) percent of acre initially under prairie 34 64

Table 1: Land-Clearing Statistics, 1860 and 1900.

Note – The source of data for lines (1) and (2) is Primack (1962a, p. 28). For lines (3) and
(4) it is Primack (1962a, pp. 11-14), the number for 1860 is obtained by averaging the data
for the 1850’s and the 1860’s. Likewise for 1900.

28
 1860 1900
(1) man-days required to build a rod of wooden fence 0.31 0.31
(2) man-days required to build a rod of stone fence 2.0 2.0
(3) man-days required to build a rod of wire fence 0.09 0.06
(4) percent of wooden fence 93 0
(5) percent of stone fence 7 0
(6) percent of wire fence 0 100

Table 2: Fencing Statistics, 1860 and 1900.

Note – The source of data for lines (1)-(3) is Primack (1962a, p. 82). For lines (4)-(6) it is
Primack (1962a, p. 202).

29
 1.7
Western / Eastern Real Wage

1.6

1.5

1.4

1.3

1.2

1.1

1.0

0.9

1820 1830 1840 1850 1860 1870 1880

Year

Figure 3: Ratio of Western to Eastern Real Wages, 1823–1880.

Note – The source of data is Coelho and Shepherd (1976) and Margo (2000). Only northern
regions, which used free labor throughout the entire period, are considered. The average of
New-England and Middle Atlantic’s real wages reported by Coelho and Shepherd (1976) are
spliced with Margo (2000)’s Northeastern real wages. The average of Eastern North Central
and Western North Central real wages from Coelho and Shepherd (1976) are spliced with
Margo (2000)’s Midwest real wages.

30
 West East
Consumption-good Sector Consumption-good Sector
Inputs: western labor Inputs: eastern labor
intermediate good intermediate good
western improved land eastern improved land

Land-improvement Sector Intermediate-good Sector

Input: western labor Input: eastern labor

Table 3: Sectors of Production.

31
 Z l
w
l = Λ(u)du
0

1 ww
q w zl

Λ(u) = 1 − uθ

Land
0 l 1
Improved Unimproved

Figure 4: Determination of the Stock of Improved Land.

32
Technology µ = 0.6, φ = 0.2, θ = 0.5
zy = 1.0, zl = 1.0, zx = 1.0
Population p = 10
Eastern land le = 0.05
Moving costs τx = 0.1, τh = 0.1

Table 4: Static Model – Parameters.

33
 Ratio of Stock of Wage Return to
westerners improved land rates western land
hw /p l (ww , we ) rw
Baseline 0.17 0.18 (0.42,0.32) 0.73
p = 15 0.21 0.31 (0.41, 0.31) 0.92
τh = 0.05 0.42 0.38 (0.39, 0.34) 1.02
τx = 0.05 0.20 0.21 (0.42, 0.32) 0.78
zy = 1.5 0.34 0.33 (0.60, 0.50) 1.40
zx = 1.5 0.22 0.23 (0.46, 0.36) 0.88
zl = 1.5 0.23 0.33 (0.42, 0.32) 0.67

Table 5: Static Model – Numerical Examples.

34
 0.7
1.0

Stock of Improved Land, Normalized

0.6

0.8
Western / Total Population

0.5

0.6

0.4

0.4
0.3

Data Model
0.2
0.2

Data
Model
0.1

0.0

0.0

1800 1820 1840 1860 1880 1900 1800 1820 1840 1860 1880 1900

A B

1.8
Model
1.7
Western / Eastern Real Wage

1.6

1.5

1.4

1.3

1.2

1.1

1.0
Data
0.9

1800 1820 1840 1860 1880 1900

Figure 5: The Model’s Fit.

Note – panel A represents the ratio of western to total population, panel B represents the
stock of improved land and panel C the ratio of western to eastern real wages.

35
 Chosen from Chosen through
a priori information Minimization
Preference β = 0.99
Technology φ = 0.2, µ = 0.6 le = 0.01, θ = 0.1
Demography nw = 1.3, ne = 1.2, f = 0.05
Driving forces Growth of zy : 1.05 and 1.07 zy1 = 2.0
Growth of zx : 1.05 and 1.07 zx1 = 1.0
Growth of zl : 1.03 and 1.06 zl1 = 0.6
Growth of τh : 0.84 τh1 = 0.3
Growth of τx : 0.84, τx1 = 0.5

Table 6: Baseline Parameters.

36
 Baseline Model
0.6
Exp. #1

Exp. #2

Exp. #3
0.5
Western / Total Population

Exp. #4

Exp. #5
0.4 Exp. #6

0.3

0.2

0.1

0.0

1800 1820 1840 1860 1880 1900

Year

Figure 6: Ratio of Western to Total Population – Counterfactual Experiments.

Note – Experiment 1: No population growth; Experiment 2: No growth in zyt ; Experiment
3: No growth in zlt ; Experiment 4: No growth in zxt ; Experiment 5: No decline in τht ;
Experiment 6: No decline in τxt .

37
 1.0
Baseline Model

Exp. #1

Exp. #2
Stock of Improved Land, Normalized

0.8
Exp. #3

Exp. #4

Exp. #5
0.6
Exp. #6

0.4

0.2

0.0

1800 1820 1840 1860 1880 1900

Year

Figure 7: Stock of Western Improved Land – Counterfactual Experiments.

Note – Experiment 1: No population growth; Experiment 2: No growth in zyt ; Experiment
3: No growth in zlt ; Experiment 4: No growth in zxt ; Experiment 5: No decline in τht ;
Experiment 6: No decline in τxt .

38
 Ratio of Westerners Stock of Improved Land
a b a b
Baseline 0.000 1.00 0.000 1.00
Experiment 1 0.006 0.97 1.188 0.45
Experiment 2 0.034 0.92 0.013 0.99
Experiment 3 0.000 1.00 0.013 0.96
Experiment 4 0.001 0.99 0.000 1.00
Experiment 5 0.647 0.52 0.336 0.89
Experiment 6 0.011 0.97 0.006 0.99

Table 7: Deviations from the Baseline Case.

Note – a: Sum of squared deviations from the baseline case; b: Ratio of the 1900 value of the
variable to its 1900 value in the baseline.
Experiment 1: No population growth; Experiment 2: No growth in zyt ; Experiment 3: No
growth in zlt ; Experiment 4: No growth in zxt ; Experiment 5: No decline in τht ; Experiment
6: No decline in τxt .

39
 Baseline No international immigration

0.7

0.9

0.6
0.8
Stock of Improved Land, Normalized

0.7
0.5
Western / Total Population

0.6

0.4

0.5

0.3
0.4

0.3
0.2

0.2

0.1

0.1

0.0
0.0

1800 1820 1840 1860 1880 1900 1800 1820 1840 1860 1880 1900

Year Year

Figure 8: Counterfactual Experiment: The Effect of International Immigration.

40